Trouble with images? View as a Web page.

Facebook Twitter More...
Polsinelli Shughart PC Health Care Law In the News
Attorneys

Matthew J. Murer
Practice Area Chair

Jane E. Arnold
Practice Area Vice-Chair

Colleen M. Faddick
Practice Area Vice-Chair

Alan K. Parver
Practice Area Vice-Chair

Janice A. Anderson
Douglas K. Anning
Jane E. Arnold
Jack M. Beal
Cynthia E. Berry
Mary Beth Blake
Gerald W. Brenneman
Teresa A. Brooks
Jared O. Brooner
Anika D. Clifton
Anne M. Cooper
Lauren P. DeSantis-Then
S. Jay Dobbs
Thomas M. Donohoe
Cavan K. Doyle
Meredith A. Duncan
Erin Fleming Dunlap
Fredric J. Entin
Jennifer L. Evans
T. Jeffrey Fitzgerald
Michael T. Flood
Kara M. Friedman
Rebecca L. Frigy
Asher D. Funk
Randy S. Gerber
Mark H. Goran
Linas J. Grikis
Lauren Z. Groebe
Brett B. Heger
Jonathan K. Henderson
Margaret H. Hillman
Jay M. Howard
Cullin B. Hughes
Sara V. Iams
George Jackson, III
Bruce A. Johnson
Lindsay R. Kessler
Joan B. Killgore
Anne L. Kleindienst
Chad K. Knight
Sarah R. Kocher
Dana M. Lach
Jason T. Lundy
Ryan M. McAteer
Jane K. McCahill
Ann C. McCullough
Ryan J. Mize
Aileen T. Murphy
Hannah L. Neshek
Gerald A. Niederman
Edward F. Novak
Thomas P. O'Donnell
Aaron E. Perry
Mitchell D. Raup
Daniel S. Reinberg
Kristen B. Rosati
Donna J. Ruzicka
Charles P. Sheets
Kathryn M. Stalmack
Leah Mendelsohn Stone
Chad C. Stout
Steven K. Stranne
William E. Swart
Tennille A. Syrstad
Emily C. Tremmel
Andrew B. Turk
Joseph T. Van Leer
Andrew J. Voss
Joshua M. Weaver
Emily Wey
Mark R. Woodbury
Janet E. Zeigler

 

Additional Health Care
Professionals


Julius W. Hobson, Jr.
Harry Sporidis

To learn more about our
Health Care practice,
click here.


February 2013

 

A Polsinelli Shughart Health Care and Antitrust Update

Merger-to-Monopoly Held Not Protected by State-Action Immunity

 

The U.S. Supreme Court on February 19th scaled back the "state action immunity" doctrine, siding with the Federal Trade Commission on an issue that had divided the lower courts and holding that a county Hospital Authority's acquisition of a competing hospital was subject to antitrust challenge by FTC. The Eleventh Circuit had held that the acquisition was immune from the federal antitrust laws because the Hospital Authority was authorized by state statute to acquire and operate hospitals. In rejecting the Authority's state-action immunity defense, the Supreme Court imposed stricter antitrust limits on anticompetitive conduct done by, or approved by, counties, municipalities, and other political subdivisions of a state. The case is Federal Trade Commission v. Phoebe Putney Health System, Inc., No. 11–1160 (2013).

What Providers Should Know

  • This decision has implications for anyone considering an argument that a merger or other conduct is approved by a State or local government and therefore immune from federal antitrust law.

  • Most regulation by counties, municipalities, and other political subdivisions of a state will not satisfy the Supreme Court's requirement of a "clearly articulated and affirmatively expressed" state policy to displace competition. Therefore, even if local regulators bless a transaction, that blessing generally will not prevent federal antitrust review.

  • Even if the State approves anticompetitive conduct of private actors, it must “actively supervise” that conduct to confer antitrust immunity on private actors.

Background

The Supreme Court has long recognized that the federal antitrust laws do not apply to acts of a State "in its sovereign capacity," including market restraints imposed by a State "as an act of government." Op. at 6. But the Hospital Authority in Phoebe Putney was not the State; it was "a substate governmental entity," acting pursuant to authority granted by a state statute. Op. at 7. Such substate governmental entities, the Court held, are immune from federal antitrust law only when they act "pursuant to state policy to displace competition with regulation or monopoly," and any such policy must be "clearly articulated and affirmatively expressed" by the State. Op. at 7-8.

Ruling

The Authority contended (and the lower courts agreed) that the Authority's acquisition of a hospital was immune from federal antitrust law because any anticompetitive effect of that acquisition was a "foreseeable result" of the Hospital Authority's statutory power to acquire, own, and operate hospitals. The Supreme Court rejected this argument, finding "no evidence the State affirmatively contemplated that hospital authorities would displace competition by consolidating hospital ownership." The State's grant of the general corporate power to acquire and own property did not authorize anticompetitive use of that power, because
"[g]rants of general corporate power that allow substate governmental entities to participate in a competitive marketplace should be, can be, and typically are used in ways that raise no federal antitrust concerns." Op. at 10. The Court explained that "'simple permission to play in a market' does not 'foreseeably entail permission to roughhouse in that market unlawfully.'" Op. at 13.

The Supreme Court did not expressly reach the FTC's alternative argument that the Authority's hospital acquisition was not immune because it "created an unsupervised private monopoly" that "must be (but is not) 'actively supervised by the State itself.'" FTC Reply Brief, available here. The Court implicitly rejected the FTC's argument for an "active state supervision" requirement in this situation, holding that

As with private parties, immunity will only attach to the activities of local governmental entities if they are undertaken pursuant to a "clearly articulated and affirmatively expressed" state policy to displace competition. But unlike private parties, such entities are not subject to the "active state supervision requirement" because they have less of an incentive to pursue their own self-interest under the guise of implementing state policies. Op. at 8.

Thus the Court made clear, over the FTC's objection, that local governmental entities like the Hospital Authority can qualify for the state-action immunity for their own conduct without satisfying an "active state supervision" requirement. When state agencies attempt to authorize private conduct, however, they must actively supervise that conduct in order to confer immunity on private actors.

In response to the Supreme Court's ruling, FTC Chairman Jon Leibowitz issued a press release stating: "Today's ruling is a big victory for consumers who want to see lower health care costs, and the Court's opinion will ensure competition in a variety of other industries as well." The exact effects of the Phoebe Putney decision remain to be seen. The decision certainly narrows the scope of the state-action defense in antitrust cases, and will affect the antitrust analysis of hospital mergers and other conduct that is approved by a state or local government agency.

For More Information

For questions, please contact:

 

  To learn more about our RSS feeds, click here. Click here to learn more about our RSS feeds. Click here to learn more about our RSS feeds.

Polsinelli Shughart | In the News

Headlines and Bylines from polsinelli.com


 

Prominent New York Bankruptcy Attorney Joins Polsinelli Shughart

KCTV5 Interviews Attorney Luke Hagedorn About Wind Energy Economics

President - Elect of the American Health Lawyers Association Joins Polsinelli Shughart

e-Alert: Changes to Patients' Rights Under the Final Rule g

Webinar Video: Honoring Our Retiring Shareholder Harlan Stamper

Subscribe to: Polsinelli Shughart Health Reform and Related Policy News

   
 

Get more news from polsinelli.com.

   
Click here to learn more about our RSS feeds.

 

ABOUT POLSINELLI SHUGHART:

    Facebook
Connect with us on Facebook. Connect with us on Twitter. Connect with us on LinkedIn.

Serving corporations, institutions, entrepreneurs, and individuals, our attorneys build enduring relationships by providing legal counsel informed by business insight to help clients achieve their objectives. This commitment to our clients' businesses has helped us become the fastest-growing, full-service law firm in America*. With more than 600 attorneys in 16 cities, our national law firm is a recognized leader in the industries driving our growth, including health care, financial services, real estate, life sciences and technology, energy and business litigation. The firm can be found online at www.polsinelli.com. Polsinelli Shughart PC. In California, Polsinelli Shughart LLP.

* Inc. Magazine, September 2012

 
       
         
         
Chicago, Dallas, Denver, Edwardsville, Jefferson City, Kansas City, Los Angeles, New York Overland Park, Phoenix, St. Joseph, St. Louis, Springfield, Topeka, Washington, D.C., Wilmington DE
 

To update your email preferences, please contact us at Interaction@polsinelli.com. To opt out of these communications, click the unsubscribe link below.

Polsinelli Shughart provides this material for informational purposes only. The material provided herein is general and is not intended to be legal advice. Nothing herein should be relied upon or used without consulting a lawyer to consider your specific circumstances, possible changes to applicable laws, rules and regulations and other legal issues. Receipt of this material does not establish an attorney-client relationship.

Polsinelli Shughart is very proud of the results we obtain for our clients, but you should know that past results do not guarantee future results; that every case is different and must be judged on its own merits; and that the choice of a lawyer is an important decision and should not be based solely upon advertisements.

Polsinelli Shughart PC. In California, Polsinelli Shughart LLP. Polsinelli Shughart® is a registered trademark of Polsinelli Shughart PC.


Copyright © 2013 Polsinelli Shughart PC ®.

 
           
Polsinelli Shughart